Our CKCs

Activity 2- Building Your Budget

Purpose:

A budget is a substantial managerial tool critical for planning and tracking the organization's expenses and income for a certain period. It is used before the actual activity begins for planning purposes, during - to track, and after an activity to measure if and how the expenses have met our goals and expectation. Building a budget plan and managing it according to the organization's vision, goals - based on realistic income and expenses - is essential for short and long term sustainability.

The goal of the unit "Building your Budget Plan" is to share practical tools with the CKC managers to develop and manage a realistic budget. This will allow the goals and objectives of the current period to be met, along with the ability to plan for the Center's future.

Goals:

learn about the importance and necessity of building a budget.

learn about the work processes involved in building a budget.

acknowledge the need to build a balanced and realistic budget.

prepare a budget as a basis for managing a community center.

Activities:

Course of the unit: About 100 minutes

Introduction

The auction game (explained in Appendix #1)

Expected Outcomes:

Building a budget plan is a substantial and vital part of creating certainty in the yearly planning of the activities of any organization, for decision making, for examining the achievement of organizational goals, and for ensuring its future activity.

Expanding on the previous unit, in which we dealt with the building of an annual work plan, we will address a substantial part of the work plan – the budget.

We will start the unit with general explanations about the nature of the budget, its importance and when is it worthwhile to plan a budget.

Then, we will detail the budget components - income and expenses - and we will build an example of a budget together.

At the end of the unit we will talk about the way the budget is used, as well as about future budgets and further work and study in this area.

Leading questions

What is a budget?

Where do we use a budget? (In the management of various organizations, government administration, home management, etc.)

What is it good for?

How is the budget helpful?

How does one decide on its size? What can be done in a case of shortfall?

Emphases:

What is a Budget?

A budget is your Center's plan for the coming year, set out in financial terms.

The budget outlines what you will spend your money on and where the money will come from.

It helps you ensure that you have the money to do what you want to do.

It enables you to make financial decisions and keep a concrete set of figures in control.

It is part of overall management. It is a key tool in financial planning. By carefully crafting a budget, you give yourself an important management tool to support your daily actions.

The budget is an integral part of the work plan and therefore should be built before you begin 'moving forward.'

Leading questions:

Why is a budget necessary? Why it’s important?

Why is budget planning important?

The slides will be shown after the participants give their answers.

Why is budget important?

It ensures that the organization has sufficient resources to carry out its objectives.

Linking the resources to the goals of the organization.

A budget permits you to identify problems better before they occur and, if necessary, alter your course of action.

It enables you to forecast cash flow.

It is a way of being accountable.

Income & Expenses

A budget consists of two main parts:

Income - current (grants, ICDL Training, printing and copying, etc.), and in the near future (grants, courses to be opened shortly, monthly rent, etc). Expenses - ongoing and future expenses such as salaries, maintenance and electricity.

While building a budget, several points are important to remember:

The budget has to be balanced between current income and expenses and in the near future (in a monthly/yearly budget).

A budget can be built for different periods of time and activity: one month, one year, a project or a course.

Keep it simple and realistic.

Start by thinking about the aims of your group. What finances will you need to achieve these aims? Ask yourself “What will the organization be doing next year?”

While building a budget, we have to think how we use the present income for the future, so that the center will be sustainable and active in the years to come.

Increasing the income or reducing the expenses has a direct effect on the center's sustainability.

Building a budget plan takes time and this should be taken into consideration. Therefore, you should start working on the budget as soon as possible.

To your opinion, in a monthly/yearly budget, what items should be included in the budget?

Income

Expenses

ICDL Training

Scanning

Electricity

Staples

Printing color

Copying

Cleaner

Transportation

Internet Surfing

paper

Salaries

Printing (black & white)

Toilet paper and Soap (omo)

Maintenance

Type of Expenses

If an annual budget is planned (not a monthly one), several types of expenses should be distinguished:

Fixed expenses: the same expenses that are budgeted for each month: bills, salaries, rent and so on.

Unique expenses: expenses such as purchasing computers and creating infrastructure, expenses incurred in the first months of the center's activity (one time only) or annually.

Workshop

Now we have the basics to build an example of a budget according to the characteristics presented so far. We will be using the Excel worksheet in order to manage the different tables and to calculate the parts of the budget automatically (Appendix #4).

Tips for building a budget plan

Avoiding some common mistakes will help you draft a budget that will meet your present needs and future objectives.

a state of budgetary balance is temporary, because while the center's expenses in the long term are fixed and identical – rent, salaries, office equipment and equipment for activities – the income is more fluid: donations end, courses being and conclude.

Make it realistic. Look at all the possible sources of money and estimate realistically how much you will earn from each.

Don't skimp on details. Include sufficient information to permit you to monitor your budget. Work out how much you need under each heading.

Keep notes on how you reach your figures.

Take into account seasonality. Does your business provide a service for which the demand varies by season? If so, factor that into your budget.

Consult the right people: Get the right people involved from the start.

Staff members with financial responsibilities should definitely have a role, as well as those who head specific projects.

Visit other groups similar to yours and find out what their expenses are

DON'T GUESS, you might find yourselves with a shortfall that could have been prevented.

If you can find out the precise cost of something – DO IT! Get quotes or use catalogues to get prices of a photocopier or other equipment.

Self reflection:

Look again at the figures. Have you left anything out?

Are you going to spend more than you are expected income?

How are you going to meet the shortfall?

Make sure that the income budget is linked to your fundraising plan.

Are you going to spend less?

Where will you invest the surplus?

Make sure that the Expenses budget is linked to your business plan.

Emphases:

The importance of budgetary balancing.

What is a budgetary shortfall and budgetary surplus?

What decisions are required in each case?

Keep it "front and center." Review it frequently and revise it as the need arises. It can warn of overspending, under spending, or spending in unexpected areas. And, it will show you whether or not you are making progress toward the achievement of your business plan goals.

Pay close attention to your actual income expenses. Every month or so compare them to the budget.

If you are not spending your funds as originally planned, why not? Does it mean that you are not operating as you want to, or does it mean that your budget should be revised?

If you fell short of your budgeted goal, ask yourself why. If you exceeded your target, determine what factors led to the increase in income. Doing so will help you to predict your future better. Look at how your fixed costs differed from your budget. Were your variable costs in line with your budget? Analyze any reasons for deviation. Were the differences caused by the timing of your expenses, unexpected costs or other factors?

The budget is an integral part of the work plan and, similarly, requires constant monitoring and consideration.

When should the budget be adapted to the activity (budgetary surplus) and when should the activity be adapted to the budget (budgetary shortfall)?

The budget, like a work plan, is a tool used for ongoing management and it should be updated and renewed periodically. In most cases, the budget is updated every activity year/month, but it is also updated at times of crisis. Therefore, criteria should be set to examine the budget and its realization (once a month, a quarter, etc.)

About nine months into the financial year you should start working on the next year's budget. By then you will have a clear idea of how your expenses and the budget match up, and what adjustments you will need to make for the next year. You will also have time to do the work involved before the New Year starts. If you are making changes in the way you operate or if you have decided what equipment needs replacing, make sure that you list the changes accurately into the new budget

If you're interested in further reading and extending your knowledge, you can turn to the following sources.

Review for now

This unit completes the items included in the work plan and allows us to start working smoothly. We focused on Building a budget plan because of its great importance. As we can see from the auction game at the beginning of the unit, Building a Budget Plan is a substantial and vital part of creating certainty in the annual planning of the activities of any organization, for decision making, for examining whether the goals set were actually achieved and for ensuring the organization's future activity.

During the unit, we explained in general terms what a budget is, its importance, and when a budget should be built. We detailed its components and together built an example of a budget. Towards the end, we discussed about budget planning and managing budget.